Google weighs in on Microsoft purchase of Yahoo, Yahoo may look to Google for help

Google's senior vice president and chief legal officer, David Drummond, said in the company's blog on Feb. 3 that given Microsoft's anti-competitive conduct in the past, coupled with its continued dominance in the technology industry, would threaten "innovation and openness" on the Internet.

Google’s senior vice president and chief legal officer, David Drummond, said in the company’s blog on Feb. 3 that given Microsoft’s anti-competitive conduct in the past, coupled with its continued dominance in the technology industry, would threaten “innovation and openness” on the Internet.

“Could Microsoft now attempt to exert the same sort of inappropriate and illegal influence over the Internet that it did with the PC?” asked David Drummond, Google senior vice president and chief legal officer, writing on the company’s blog. “While the Internet rewards competitive innovation, Microsoft has frequently sought to establish proprietary monopolies — and then leverage its dominance into new, adjacent markets.”

Yahoo declined to comment. Yahoo has said it is weighing Microsoft’s hostile offer and alternatives.

While control of Internet advertising dollars is an important consideration, it seems that Google is concentrating more on the issues of instant messaging and e-mail, contending that a combination of Yahoo and Microsoft would result in an “overwhelming share” of those markets.

But is this just Google’s way of getting back at Microsoft for trying to de-rail Google’s acquisition of DoubleClick?

From the NY Times:

Like Microsoft’s $44.6 billion offer for Yahoo, the Google-DoubleClick deal was announced on a Friday, and Microsoft lost no time objecting. By the weekend, Microsoft, working in conjunction with AT&T and others, had begun urging antitrust regulators to scrutinize the deal.Microsoft claimed that the Google-DoubleClick combination would reduce competition in the online advertising business and put too much consumer data into the hands of Google, raising concerns about possible intrusions into user privacy.

As that merger began to undergo review by regulators and faced inquiries from Congress, Microsoft, which itself had bid for DoubleClick but lost, remained one of its most vocal opponents. In September, Microsoft’s general counsel, Bradford L. Smith, for instance, told a Senate subcommittee dealing with antitrust matters that the deal would give Google “sole control over the largest database of user information the world has ever known.” And Microsoft filed some of the most detailed objections to the merger with the Federal Trade Commission, the agency in charge of reviewing it.

So, this could just be Google’s idea of a payback, or there could be other plans afoot. According to Reuters, Yahoo’s management is considering a business alliance with Google as a way to rebuff Microsoft’s hostile offer.

Yahoo management is considering revisiting talks it held with Google several months ago on an alliance as an alternative to Microsoft's bid, which, at $31 a share, Yahoo management believes undervalues the company, the source said.

A second source close to Yahoo said it had received a procession of preliminary contacts by media, technology, telephone and financial companies. But the source said they were unaware whether any alternative bid was in the offing.

According to Sanford C. Bernstein analyst Jeffery Lindsay, “the Microsoft bid of $31 is very astute” because it would pressure Yahoo management to take actions that could unlock the underlying value of Yahoo assets, estimated at upward of $39-$45 a share.

What is next? The blogsphere has been buzzing since the Feb. 1 announcement by Microsoft. Many people are afraid that Yahoo will disappear under Microsoft branding and popular sites like Flickr and del.icio.us will disappear completely or change so much that they will not satisfy the community. Whatever happens next, it is clear that Microsoft is determined to bring Yahoo under Redmond control. What do you think the best outcome will be?